The UPM2 agreement and its implications

Draft paper submitted to university debate

Montevideo, Uruguay September 2019

Draft for a meeting held the 26 of september 2019 in Faculty of Engineering facilities to discuss a
second cellulose mill of the UPM finnish company

Foreword (written by the translator)

This text "The UPM2 agreement and its implications, ", contains the initial analysis carried out by a
group of professors from the Faculty of Engineering, UdelaR at the request of the Association of
Professors of the Faculty of Engineering (ADFI) in a Assembly held on July 15, 2019, which asked
for as input for the discussion of the engineering teachers 'union (a member of the unique
Uruguayan workers' central PIT CNT), evaluating the agreement between Uruguay and the UPM
company (from Finland).
The study commissioned by the assembly of university teachers, inquired about the controversial
aspects of the agreement with this paper company that already own a pulp mill in the country,
located on the Uruguay River, borderline with the Argentine Republic, a plant that prevously had
already generated a conflict between the 2 countries and a trial at the international court of justice in
The Hague.
This new plant, twice the size of the previous one, is being done with various economic and
environmental damages that has been signaled for Uruguay. The project and its location has been
endorsed by two successive administrations in this country (government 2015-2020 of the
Progressive Encounter Party and by the current government of the so-called Conservative
Multicolor Coalition 2020-2025, with several parties that are members of it).
This draft collective analysis was sent on September 26, 2019 to all the professors of the
aforementioned Faculty, by a member of the ADFI board, as a base document for a debate in a
panel. There was afterwards a meeting to accomplish this debate at least, which was held on the
same Thursday, September 26, 2019 in the Building of Classrooms of the UdelaR adjacent to the
Faculty of Engineering (known as “El Faro.” This meeting was done with speeches of researchers
on the subject and an afterwards debate. It has took place without having obtained the presence of
specialists for defending as panelists the contract with the Finnish corporation. This translation is to
spread internationaly a local technical analysis, specially in nordic countries and elsewher in the
world

(Translator into English in 2020: Prof. Ing. Carlos Anido; carlosanido@yahoo.com.ar)

Introduction

In November 2017, an investment agreement was signed by the Secretary and Assistant Secretary
of the Presidency and the Director of the OPP on behalf of Uruguay, and in the counterpart,
representatives of the UPM company, for the installation of a pulp mill in Pueblo Centenario,
border between Durazno and Tacuarembó 1. Together with the UPM plant in Fray Bentos, and the
Montes del Plata plant in Colonia, this would be the third pulp mill in Uruguay. In addition to the
installation of the plant, the agreement involves the construction of a railway from Paso de los
Toros to Montevideo, a viaduct that allows the access of freight trains to the port of Montevideo, a
logistics plant in the current port area, and the dredging of the port area. As we will see later, an
important part of the investments to achieve this infrastructure will be made by the Uruguayan
state.
Along these lines, we will try to generate debate around the contribution of forest production to
national development, and the implications of the agreement recently signed for the installation of
the third pulp mill. We understand that this debate makes the essence of the country we want, and
directly affects its education, the commitment to qualified resources, and public happiness, three
issues that directly involve us. We believe that as teachers of the Faculty of Engineering it is
essential to make a contribution that reflects a critical and informed view of the matter.

Country model: primarization, foreignization and dependency

Uruguay has always occupied the role of supplier of raw materials in the international division
from work. To the primarized economy of wool, leather and meat, wood and soy have been added
in recent years. The development of forest production in Uruguay dates back to 1987, the year the
"Forest Law" was approved, seeking to promote the development of the sector through important
tax exemptions, such as IRAE (an enterprise tax), Wealth Tax and Rural Real Estate Contribution.
At that time, of the 16.4 million productive hectares available to Uruguay, only 46.000 hectares
were forested for industrial purposes, with 1.2 million hectares planted by 2017. Of these, 80%
correspond to plantations of Eucalyptus, mainly destined for the production of cellulose pulp, and
20% for Pine, destined for mechanical transformation (panels and sawing) 2. As of 2018, the
timber forest sector in Uruguay represented 2.4% of GDP and directly employed some 17.000
workers (1% of total employment in Uruguay) 3. Although these figures are considerable, if we
compare the percentage of participation in GDP with that of total employment in Uruguay, it is
concluded that it is a sector that is not very intensive in employment in relation to the average of
the economy 4.

Land ownership
1
The "ROU UPM Contract", from 11/7/17, is available on the Presidency page.
2
Sociedad de Productores Forestales del Uruguay - http://www.spf.com.uy/ Society of Forest Producers
of Uruguay
3
Hoja de ruta Forestal Madera - Transforma Uruguay - 2018. Wood Forest Roadmap - Transforma
Uruguay - 2018
4
El sector forestal en Uruguay y la Inversión extranjera, Instituto Cuesta Duarte (PIT-CNT), 2018. The
forestry sector in Uruguay and foreign investment, Instituto Cuesta Duarte (PIT-CNT), 2018.
 UPM Forestal Oriental, a company with Finnish capital (note of the translator: some shares are in
the hands of finnish government and trade unions apparently) that has been operating in Uruguay
since 1990, has 280.000 own hectares, 146.000 of which are forested 5; while Montes del Plata, of
Chilean and Swedish-Finnish capital, has 150,000 forested hectares. In other words, both
companies have almost 450.000 hectares, thus becoming two of the largest latifundia in the
country. This represents an enormous foreignization of the land, with its corresponding loss of
national sovereignty, at the same time that it has generated the displacement of small rural
producers 6. Another relevant actor in forest land tenure is the "Forest Investment Funds", also
known as TIMO, financed mainly by social welfare private funds (AFAPs). As of 2017, they had
218.000 hectares, 91% of which were forested with foreign capital 7.

Enterprise Hectares (thousands) Capital's country of origin

UPM Forestal Oriental 280 Finnish

Montes del Plata 150 Swedish and chilean/Finnish

Fondos TIMO (tipo AFAP) 218 91% foreign

LUMIN 120 Brasilian

URUFOR/COFUSA 85 Uruguayan

Dank-Fymnsa 12 Mostly uruguayan

TOTAL 865 72% foreign investors

Table 1: some of the companies that own forest land in Uruguay.

Wood destination

More than 70% of the forested wood is exported as logs to the Free Zone for the production of
pulp of cellulose in the UPM plants, inaugurated in 2007 in Río Negro, and in Montes del Plata,
which has been operating since 2014 in Colonia. In addition to cellulose, these plants generate
energy from biomass, part of which they sell to UTE (note of the translator: Electrical state
enterprise, Mwh sold at a priviliged prize in comparaison to the market one). In the UPM free
zone is also the company Kemira, which exclusively supplies UPM with chemical inputs for the
production of cellulose pulp.

The remaining 30% of the forested area, which corresponds to Pine and a certain type of
5
UPM Forestal Oriental - Informe resultados 2018 - https://www.upm.uy/forestal/informe-anual/ UPM
Forestal Oriental - Results Report 2018
6
According to the 2011 General Census of Agriculture, the number of farms was reduced by
12350 in relation to the same census of the year 2000 (a reduction of 21.6%). In the same period,
the number of family farms decreased by 7,407 (22.7%).
7
“Invest from the root and with time”, Forestry Magazine (Revista Forestal), 04/28/2017
Eucalyptus, is destined for mechanical transformation. This includes the production of "plywood
panels", highlighting the Brazilian-owned company LUMIN, located in Tacuarembó. It also has a
biomass energy factory and owns 120,000 hectares, 65,000 of which are forested. Another part is
used for sawing, where companies such as Frutifor, also in Tacuarembó but with Chilean capital,
and URUFOR-COFUSA, in the department of Rivera, stand out. The latter is a Uruguayan
company, which also has an energy production plant from biomass and owns 85,000 hectares in
the departments of Rivera and Tacuarembó, 60% of which are forested 8. Also in Rivera is the
Dank-Fymnsa sawmill, mostly Uruguayan capital, and which has a biomass plant and some
12,000 forested hectares.
A part of the wood suitable for mechanical transformation is exported without added value due to
the lack of demand from the local industry. This can be seen in Table 2, where the increase in the
export of untreated pine wood in 2017 is highlighted.

Year 2012 2013 2014 2015 2016 2017

Non Coniferous 16225 12873 20879 22799 17022 21105

Coniferous 451 3572 4619 429 4419 86530

Table 2: Exports of raw untreated wood (thousands of dollars) - MGAP -

2018 Yearbook. Does not include wood exported to the Free Trade Zone
from pulp mills

On the other hand, there are local industries that produce paper from cellulose pulp, as is the case
of Softys (ex IPUSA), located in Canelones and with Chilean capital. Another important company
in this sector was FANAPEL, located in Cologne, which has recently gone bankrupt. The latter
industries, which add more value to wood in relation to the production of pulp, do not have the
same incentives as pulp mills, making them less competitive.

Figure 1 shows the evolution in GDP share of manufactured products in the forestry sector. Of
note is the increase in the pulp and paper line in 2008 and 2015, corresponding to the start of
production at the UPM and Montes del Plata plants, respectively. On the other hand, the
contribution to GDP of the manufacture of wood and wood products, such as sawing and
plywood, has remained stagnant at around 0.5% throughout the period.

8
Public Summary of the Management Plan of Compañía Forestal Uruguaya S.A - December
2018 - http://www.urufor.com.uy/files/Resumen_Publico_del_Plan_de_Manejo_dic_2018.pdf
Figure 1: Prepared based on BCU data for the 1st semester of 2019 (2017 and 2018 are
preliminary data)

Given that most of the products of the forestry sector are exported, one can have an image of the
production by item analyzing the exports of the sector. These data are shown in Table 3. In
manufactured products, the decrease in the export of MDF boards from 2015 stands out, which is
explained by the closure of the Urupanel company in 2014. Something similar occurs in the export
of paper and cardboard, with a marked decrease in 2017, probably due to the closure of the
FANAPEL company at the beginning of that year. On the other hand, the export of cellulose pulp
has increased steadily.

Year 2012 2013 2014 2015 2016 2017

Plywood 65246 74.439 67795 62164 42945 63669

Paper and paperboard 46111 42969 52104 55737 30297 7338

Fiber Boards (MDF) 7198 10446 6664 393 69 7

 Cellulose pulp 831723 776892 902625 1265039 1237373 1334291

Table 3: Forest manufacturing exports in thousands of dollars (includes Free Trade Zone)
MGAP - 2018 Yearbook

The data shows the pulp industry as the main destination for wood raw material, to the detriment of
other industries with higher added value such as the production of boards and sawing. In recent
years, it has reached the point of raw exporting much of the wood suitable for mechanical
transformation, due to the lack of local demand. On the other hand, there are industrial development
options based on wood that have not yet been explored or have not been developed to their
maximum capacity. For example wood construction, the production of adhesives or the use of by-
products from sawing. The agreement signed for the installation of a third pulp mill, which will
increase the demand for wood for this use, implies consolidating the destination of the territory
declared of forest priority to the pulp industry; thus deepening dependence on a single primary
product, and taking away space for the development of industries with higher added value.

Education and Research

The agreement for the installation of UPM 2 imposes certain commitments on the Uruguayan State
in relation to its public education and research policies. Before analyzing them, it is worth
mentioning that the UPM company has interfered at different levels of the public education system
since its inception, mainly through the "UPM Foundation". According to the company, this
foundation "promotes the development of communities where the company operates in the interior
of the country, promoting education and entrepreneurship through joint work with social
organizations and local leaders."

Current UPM activities in the public education system

At the Tertiary level, UPM maintains a collaboration agreement with the recently created
Technological University (UTEC), which “is framed within the cooperation and networking
policies defined by the UTEC and in the determined support of the Finnish company to the
reproduction of knowledge in the interior of the country, the strengthening of the communities
where it operates and the development of the forestry sector in Uruguay ” 9. This agreement
implies, in particular, UPM's financial collaboration towards UTEC, since "UPM contributed
financially to the civil works of the Southwest Regional Technological Institute", located in Fray
Bentos, with a contribution of 4 million dollars. The same agreement provides for the training of
students at the UPM plant, allowing them to "access from the beginning of their training to what
will be the reality of the world of work", and UPM's participation in UTEC activities.

UPM, through its Foundation, also has influence in public Primary and Secondary education,
influencing those who decide what to teach, where and in what way. They have, among other
things, a digital classroom specially designed for training on a campus of the UTU Agrarian

9
https://utec.edu.uy/upm-y-utec-refuerzan-el-compromiso-para-la-generacion-de-capacidades-de-
formacion-que-contribuyan-al-desarrollo-de-la-region-suroeste/
School 10, in addition to different projects in which the company meddles in local communities,
such as: "Seeding my future" 11, "Tell who counts" 12 and "Tales from the forest". It is interesting to
analyze the bases of this last contest, where the main theme was "forests (natural or artificial),
landscape, environment and biodiversity." These bases establish that "text and proactive images
will be positively evaluated against the reactive, both conceptual and attitudinal ", thus censoring
any criticism that students may have towards the activities of the company and the forestry sector.

In addition to activities aimed at children, the UPM Foundation carries out training activities aimed
mainly at teachers and "managers" of teaching in their areas of influence. Together with the
University of Montevideo, and "Reaching U - Foundation for Uruguay", it offers since 2019 a
"Postgraduate in Education: Specialization in Educational Leadership, Management and
Innovation", aimed at authorities of educational centers in the area of influence of UPM. The
objective of the postgraduate course is to provide the teacher with "conceptual, methodological and
ethical knowledge for the development of their functions". In association with the Catholic
University, it has offered since 2015 a postgraduate teaching training in "Curriculum and
Evaluation" and a Diploma in Teaching Updating. Along with the "Strong Young People -
Uruguay" group, he imparts a "Uruguayan Diploma in Positive Psychology applied to character
education", aimed at "educators from the interior of the country".

Behind what seems to be UPM's disinterested participation in the teaching activities of the
communities linked to their areas of influence, one can see the interests of increasing their
acceptance, silencing criticism and transmitting useful values. The priority does not seem to be the
teaching of conceptual knowledge, but of the methodological (how to lead, plan the class, evaluate,
manage, motivate, develop strategies) and the behavioral in a moral sense (how to think positively
and make others think positively) . It is evident, in turn, that it seeks to reach directly those who
will later reproduce the inculcated, such as directors of educational centers, teachers, professors,
recruits and local leaders.

Future responsibilities

Regarding the agreement for the installation of UPM 2, some of the commitments assumed by the
Uruguayan state in educational matters are:

"Organize and finance the improvement of technical universities (UTU), mainly in Paso de los
Toros, Durazno and Tacuarembó, to improve their ability to provide educational facilities and
resources with respect to the mechanical, instrumentation and electrical disciplines." "In doing so,
10
https://www.upm.uy/prensa/todas-las-noticias/2019/05/fundacion-upm-promueve-la-conectividad-en-
paso-de-los- carros-inaugurando-aula-digital/
11
https://www.upm.uy/fundacion/proyectos/proyectos-fundacion/sembrando-
mi-futuro/

12
https://www.upm.uy/fundacion/proyectos/proyectos-fundacion/cuenta-
quien-cuenta/
you should take into account and apply in good faith UPM's visions regarding: the needs of your
value chain in relation to the UPM project [...]”.

In turn, the Uruguayan state agrees to work "in good faith" to develop a new title technician called
"Process Control Technologist", to be offered at the UTEC. It also establishes a "Training and
professional advice plan" to be issued through the National Institute for Employment and
Vocational Training (INEFOP), in which "UPM must determine the needs and appropriate training
profiles".

In this way, the agreement directs the public educational offer towards the purposes and interests
of the company, forcing the Uruguayan State to follow educational policies imposed by a foreign
company, whose interests are guided by economic gain. Thus, the autonomy of the Public
Education Councils established by the Constitution is violated, which provides that Public
Education will be governed by Autonomous Directive Councils. The only constitutional provision
that establishes some limitation on the autonomy of these Councils is reserved to the laws dictated
by the Parliament, and not to the orbit of the Executive power, which is in this case where the
contract with UPM has been signed. The Executive is forbidden to have the Teaching programs
and curriculum; much more do it by contract, subjecting them to "the visions" and the interests of a
private company. Therefore, the entire content of this section of the agreement may be considered
unconstitutional.
In addition to teaching, the agreement commits the Uruguayan state to create a "Forest Forest
Technological Center" in Tacuarembó, and a "Technological Center in Bioeconomy, which
includes the chemical and physical transformation of wood within its competency topics. " For
both centers, "public-private governance" is foreseen, which in the first case "will seek to include
the Society of Forest Producers". On the other hand, the state and the company agree to promote a
Fund for research projects. This Fund will be jointly financed and destined to the development of
"applied research projects, as well as postgraduate scholarships, internships and other technical
training in areas of interest." The subsidy that this implies on the part of the State to the generation
of knowledge for the utility of the company is clear. In turn, a privatization of the management and
definition of research and technology transfer policies is promoted in key areas of the country's
production; avoiding allocating these funds to create and strengthen research groups in current
public institutions that are sustainable over time and generate knowledge with greater autonomy
and capacity for appropriation by the state and society.

Environmental impact

The second UPM plant will be installed on the Río Negro, at the height of Paso de los Toros. This
is one of the biggest differences with the first two pulp mills, which are located on the Uruguay
River. The latter has a flow ten times greater than that of the Río Negro, which allows minimizing
the impact of the effluents dumped by the plant. To this lower flow we must add the current poor
state of the Negro River, mainly due to the use of fertilizers for agricultural production in the area,
confirming a phosphorus concentration of between 80 and 90 micrograms per liter, while the
maximum admissible limit is 25 micrograms per liter 13. These high levels of phosphorus lead to
the generation of cyanobacteria, which cause harm to health and even tourism. It should also be
taken into account that, downstream from the site where the new UPM plant will be installed, there
are two dams that retain water in their reservoirs, which further facilitates the proliferation of these
cyanobacteria. Finally, and not least, the lower flow available for the new plant and the existing
reservoirs in the Negro River, it is added that this plant will have an estimated production of 2.1
million tons of pulp per year, almost two times higher than that of UPM Fray Bentos, which stands
at 1.3 million.

Due to the foregoing, the agreement requires Uruguay to provide, artificially, “a minimum flow in
the Río Negro, downstream from the Rincón del Bonete Dam, according to the environmental
guidelines established by the Executive Power and the results of the Study of Environmental
Impact of the Pulp Mill, UPM not being obliged to make any compensation for said minimum
flow. ” This requirement to establish a minimum flow in the Río Negro will be achieved through
the Rincón del Bonete dam, where a good part of the energy consumed by the country is produced.
This makes energy production subject to compliance with the terms of the contract with UPM,
which can translate into less than optimal management of energy production, with consequent
economic losses for the state.

According to estimates from teachers at the Faculty of Sciences, the UPM 2 plant would increase
the level of phosphorus in the Negro River, which is already above what is allowed, between 4%
and 8%. In turn, at a time when the river's waters are at their lowest level, it would increase
between 20% and 30% 14.

Finally, it is very likely that to guarantee the minimum flow to UPM it will be necessary to
increase the height of the reservoir where the dam water is stored. This would translate into a
negative impact on the coasts of the San Gregorio de Polanco spa, which is located on the Negro
river, upstream of the dam. In this way, tourism in the area would be harmed, which represents the
highest economic income for the population of San Gregorio, made up of about 3,500 inhabitants.
Beyond these impacts of flow control, it is worth asking how this flow will be guaranteed in times
of drought such as the most recent in 2018, which in turn are not unusual in the area.

Labor legislation

The agreement establishes the creation of a negotiation environment between the PIT-CNT, UPM
and the Ministry of Labor, for the implementation of a protocol for the prevention and resolution of
conflicts, as well as the regulation of pickets and occupations. The government agrees to
incorporate what is agreed with UPM into the rest of the country's labor legislation, which means
the direct impact of a multinational company on the working conditions of all Uruguayan workers.
13
https://ladiaria.com.uy/articulo/2017/2/segun-expertos-el-rio-negro-ya-esta-en-una-situacion-ambiental-
critica-e-impacto-de-planta-de-upm-seria-muy-negativo/

14
https://ladiaria.com.uy/articulo/2017/2/segun-expertos-el-rio-negro-ya-esta-en-una-situacion-ambiental-
critica-e-impacto-de-planta-de-upm-seria-muy-negativo/
Specifically, the contract states: "ROU assumes the firm commitment to [...] Incorporate
Uruguayan Positive Law
-under the form of law, decree or, eventually, collective agreement-, the norms resulting from the
agreements that are reached as a result of said negotiation, as well as the applicable mechanisms to
ensure their observance ... If the result of the negotiations in this area it is not fully satisfactory to
the requirements of the UPM Project, it may constitute a reason for UPM not to make a positive
Final Investment Decision. ”

Public investment

A fundamental aspect of the analysis corresponds to the amount, modality and destination of the
public investment necessary to carry out the project. Given that the State budget is limited, its
distribution deserves political reflection, and as workers we must ensure a fair distribution of the
national budget and in particular how the educational budget is prioritized.

For this, it is enough to see a single example: when the University claimed an amount close to 120
Millions of USD to finalize the re-functionalization of the Hospital de Clínicas, from the Executive
Branch it was said that there were no resources, and that it could only be achieved by privatizing
areas of the hospital in the format of Public-Private Participation, so as not to increase the fiscal
deficit and " not affect the investment grade ”. However, in the 2017 Accountability, through
article 310, US $ 173 million is transferred from the Energy Stabilization Fund to the “Central
Railway Project”; money that was in the coffers of the State, so its use did not increase
indebtedness or the fiscal deficit if it was directed towards other programs of social interest. It is
worth mentioning that the aforementioned Central Railroad Project later turned into the railroad for
UPM.

According to the ROU-UPM contract, the works that the state undertakes to carry out for the
installation of
UPM2 include:
1. the railway project;
2. the Viaduct Project on the Rambla;
3. Road Projects;
4. the dredging works of the National Port Administration (ANP);
5. electrical installation work

In the report "Financial evaluation of income and expenses of the UPM2 project" some of these
investments are quantified 15:

Concept Millions of USD

PPP Central Railway 2250

15
https://medios.presidencia.gub.uy/tav_portal/2019/noticias/AD_336/0.%20Escenarios%20UPM%20versi
%C3%B3 n%20MEF%20OPP%20(10-12).pdf
 Central Railroad expropriations 21,5

Additional works Central Railroad 93

Road maintenance 198 (11 yearly)

Works in the Port 96,5

TOTAL 2659

Table 4: Investments that the Uruguayan state commits to make for the UPM2 installation

This does not include the connection to the 150 kV electricity grid to be made by the state-owned
company UTE, the tax expense associated with tax exemptions and the Free Trade Zone, nor the
eventual cost overrun for the purchase of energy from UPM at $ 72.5 / MWh for 20 years. On the
other hand, the clause of the contract that obliges ROU to guarantee a minimum flow of the Río
Negro, will cause a drop in the generating capacity of the dams installed on said river, causing
additional expenses of between 45 and 160 million USD annually 16. Therefore, although the
works mentioned in the previous table total 2.629 billion USD, the cost to the State is even higher.

Furthermore, according to the agreement, UPM's investment would be about 2.48 billion USD. In
other words, the Uruguayan State will invest more money than UPM itself, without participation
in the profits of the venture, which will be large. It may even be the case where UPM decides to
terminate the contract, without paying any fine for it, while the State is already committed to
carry out the works, in particular the 2.25 billion USD of the Central Railway Project.

According to estimates by Gustavo Melazzi, doctor of economics, taking a production cost of 300
USD per tonne of pulp in Uruguay and considering an annual production of 2 million tons, UPM2
would have earnings of USD 800 million per year. That is to say that, over 20 years, the company
would have a profit of 16 billion dollars. If UPM's initial investment is discounted, which may be
reimbursed in its first three years of operation, this implies a net profit of $ 13.52 billion. In other
words: in 20 years, for every dollar invested by UPM, UPM will earn five net profits; largely
thanks to state investment. 17

Before the contract was known, the government announced the arrival of an investment of 4,000
million USD by UPM and a counterpart from the Uruguayan State of approximately 1,000 million
USD, crediting the idea in public opinion that it was a great business for the country. In the words
of President Tabaré Vázquez himself in July 2016: “The company, with its headquarters in
Finland, will invest 4 billion dollars in the installation of the industrial plant and part of the
logistics, which will be complemented by some 1 billion dollars in charge of Uruguay ” 18.
16
http://semanariovoces.com/upm2-las-sorpresas-continuan-por-
williamyohai/

17
https://brecha.com.uy/quince-observaciones-no/

18
https://www.presidencia.gub.uy/comunicacion/comunicacionnoticias/conferencia-vazquez-
planta-upm
UPM train

The agreement involves the construction and maintenance, by the Uruguayan state, of a railroad
that will connect the city of Paso de los Toros, where the UPM plant will be located, with the Port
of Montevideo. This project will be carried out through a Public Private Participation (PPP)
contract, with a total cost of 2.25 billion dollars, plus 11 million annually for maintenance, and
whose construction must be completed by February 2022. In exchange for the use of the route, it
is estimated that UPM will pay only 3 million dollars annually to the state. As anecdotal data, but
which reflects the way in which some points of the agreement have been negotiated, it can be
mentioned that originally the contract foresaw an estimated payment of 30 million dollars per year
by UPM, but, due to a translation error, uruguayan state accept then it to became ten times smaller
19
.

In addition to this, the state plays a guarantor role against UPM for the inconveniences that may
arise in the event that the company hired to carry out the construction of the railway project fails
with some of its commitments. On the other hand, if improvements to the project are proposed,
they must be agreed by both parties to the contract. This means that if there are improvements that
only benefit citizens, they must still be approved by the company.

Once the construction of the pulp mill is completed, the Uruguayan state agrees to give
“unrestricted access 24 hours a day, 365 days a year” to UPM and / or its rail operator; also
ensuring "priority access to the railway" for a certain number of daily "slots" or periods of time
for the exclusive use of UPM. In this way, in case the use of the road coexists with some type of
passenger train, they must adapt their departure and arrival times according to the use of UPM
time slots, which will indicate their use of slots with at least 24 hours of anticipation.
The uruguayan state has already begun the process of construction of the railway project, using the
method of Public Private Participation (PPP) to finance it. This process has involved putting them
in various state agencies operating at the service of the multinational UPM, and in some cases with
mechanisms that could be considered irregular from a legal point of view. An example of this was
the declaration of national interest of the railway project by the Council of Ministers20, as well as
the investment in salaries for DINAMA technicians (Dirección Nacional de Medio Ambiente or
National Directorate for the Environment) who worked on the authorization of the UPM2 project
21
. The start of the railway works has involved the complete halt of passenger transport, affecting
more than 1,300 people who depended on rail transport, since it presented a benefit of up to 50% in
the price of the ticket and a shorter travel time compared to suburban buses.
19
https://www.montevideo.com.uy/Noticias/Por-error-en-contrato-UPM-paga-diez-veces-menos-en-uso-
de-via-ferre a--segun-abogado-uc718604

20
"La construcción del tren para UPM inicia el fin del ferrocarril público en el país", Sudestada,
08/04/2019.

21
“Aumentan en $ 20 millones sueldos a técnicos que trabajaron en la autorización de UPM”, El País,
28/05/19.
The Executive Power, through the MTOP, defined that the route of the train will be carried out on
the old route, which implies the passage through the middle of several densely populated
neighborhoods of Montevideo, all of them located in Montevideo’s Municipalities G and C 22. This
implies that its inhabitants must coexist with a daily flow of freight trains 800 meters long, at a
speed of up to 100 kilometers per hour, loaded with cellulose and chemical products23. According to
UPM's own risk analysis, damage to existing structures is considered significant and damage from
construction of “trenches” is critical.

The road project ends with a viaduct of more than one kilometer in length on the coastal boulevard,
to allow the train access to the port of Montevideo. UPM will build there a logistics plant of more
than 10,000 square meters in which to prepare the ship for pulp to be exported.

Vices of form and unconstitutionality of the agreement

According to a citizen complaint for unconstitutionality, presented in Parliament on June 5, 2019,

the signed agreement presents an extensive series of formal defects. The first has to do with the
constitutional principle of specialty. Public bodies are governed by this principle, which means that
"they can only act in those areas and matters expressly assigned to them by the Constitution or the
Law as within their competence and that any action outside those competences is illegitimate." In
the case of the agreement with UPM, this principle is violated in several points, namely:

1. The Executive Power (PE) approved a contract with a foreign company. Treaties must be
ratified by the Legislative Power (PL), which did not happen.
2. The contract approves legal norms that binds the PL, particularly in relation to positive
labor law.
3. The contract runs over the autonomy of departmental governments when defining projects
in their jurisdiction.
4. The EP approves, without consulting the PL, that in the face of disputes between ROU and
UPM, the judge is a supranational body (ICSID - World Bank).
5. The contract goes beyond the autonomy of the autonomous Teaching Councils when
defining what careers and contents should be issued by state teaching bodies.

There is also a violation of the principle of equality established in article 8 of the Constitution. This
violation consists of permanently assuring an individual the preferential and privileged use of a
public transport route of almost three hundred kilometers in length, to the detriment of the rest of
the country's inhabitants and companies, rendering the State accountable to that individual of all the
steps of construction and subsequent maintenance of the track. In a republican regime, it is
inadmissible that public works be carried out to the measure and under the control of a private
company, or that are expressly destined for the commercial benefit of that private company.
Finally, guaranteeing UPM a minimum flow of water free of charge, with the negative implications
for the state and a certain part of the population, derived from the way in which was said flow will
be guaranteed, violates the definition of water as a public good and "Subordinate to the general
interest", which was established in the Constitution (Art. 47) from the popular struggles that led to
the victory of the plebiscite in 2004.
22
"La política para la bahía que el tren de Upm va a liquidar", Brecha, 5/7/19.

23
"Las irregularidades que rodean al proyecto ferroviario de UPM", Sudestada, 25/11/2018.
Conclusions

The University of the Republic, the public one, and its teachers in particular, have been avoiding
certain debates for some time. We, some teachers of it, believe as part of it, that it is necessary to
rethink and discuss which country we want to live in, in a frank, informed and critical debate. The
country's development, its capacity to be sovereign, are inextricably linked to the development of
awareness and popular participation.

This agreement represents a country model, both for its intention (the desperate search for FDI,
that is Foreing Development Investors) and for its action (the interference of a multinational in
national affairs). In this debate, a way of conceiving national development is crystallized, which far
from adding value to our raw material, deepens dependence on commodities. Is this the only
agreement, the only productive activity that deepens this reality? Certainly not. But it is in this
agreement where the subjection of Uruguay and its population to the economic interest of a
company is synthesized more clearly.

From the University we must demand from the political power the development of new industries
from wood and its derivatives, and the promotion of the current ones, seeking to add more value to
this input. In addition to the greater autonomy for the country in relation to the commodity markets,
this will generate greater demand for the participation of our graduates and researchers in national
production, promoting quality labor sources. On the other hand, it is necessary to explain the
environmental problems that the country is experiencing. The censorship of the dissemination of
results of scientific activities related to water, established for example in the administration’s so-
called "gag decree", highlights the importance of these investigations, and the role that the
University can play. At the same time, it is impossible to think of sustainable production solutions
that do not open the debate on the use of land: who they are, what they are used for and in what
way. Or about the importance of public investment in favor of local development and social
welfare.

In short, now it is about fighting the road of deals that we are being forced to travel as a country,
and against which there is a de facto consensus among the main political parties in the country (note
of the translator: there are many suspicions raised it were because of unknown benefits obtained of
unknown nature, legal or illegal), based on a tacit accompaniment of mute silence by many popular
organizations. In this way, the path that is being accepted to go, is the one that despises
environmental arguments, subjects education to economic interests and adjusts the legislation to
accommodate foreign investment. A course of action that has involved the systematic repression of
every demonstration that has been carried out denouncing the agreement and deepens the looting of
natural resources that the left described 50 years ago, but that today does not seem to exist for
political parties. A path that, in silencing the exchange of ideas, prevents us from looking up to
think about the Uruguay we want in the future, and leaves us with the Uruguay that we have.